The third stimulus checks are largely a thing of the past, it is not clear whether they will come ever be a fourth, and President Joe Biden has turned his attention to spending money on roads, bridges and other infrastructure — and American families.
But what about student loan forgiveness? It may not get as much attention as other issues in Washington, but it hasn’t gone away. So if you’re inundated with student debt, there’s still reason to hope for major relief.
Biden has publicly stated that he is willing to waive $10,000 in federal student loans per borrower, but several developments could pave the way for the president to forgive up to five times as much.
1. Members of Congress Continue to Push for $50,000 in Forgiveness
Senate Majority Leader Chuck Schumer, Massachusetts Senator Elizabeth Warren and other leading Democrats continue to urge Biden to cancel as much as $50,000 in student loans for all borrowers.
“Student loans weigh heavily on millions of families,” Schumer said in a statement. “We must do everything in our power to provide real aid to the American people.”
At a recent virtual event on student debt, the Majority Leader said he and Warren have warned the president that they will be ruthless. “We said, ‘We’ll keep going until you do this,’ and to his credit, he said, ‘Go ahead,’” Schumer said.
2. Biden has people research the $50,000 question
The president has said he’s not sure if he alone has the authority to divest $50,000 in student loans per borrower, so Senator Schumer announced in March that the Justice Department had launched a legal investigation into the president’s ability to general student loans. forgiveness.
The top Senate Democrat has insisted that Biden does indeed have the power to wipe out lavish amounts of student debt with just “a tap of a pen”.
Meanwhile, the president has asked his education secretary to also investigate the $50,000 demand — and prepare a report.
When reports first surfaced on this evaluation from the Department of Education on April 1, White House Chief of Staff Ron Klain was quoted as saying the results were expected “in the coming weeks.”
3. A new law makes forgiveness tax easier
The COVID-19 relief bill the Biden signed in March — the one with those third, $1,400 stimulus checks — also included a tax exemption for student loan forgiveness that could save borrowers a lot of money.
With a few exceptions, the student loan waived by the government has traditionally been considered taxable income. But a provision added to the stimulus bill by Senator Warren and fellow Democrat Senator Robert Menendez of New Jersey would exempt waived student debt from federal taxes until 2025.
Previously, if you canceled $50,000 of your student loans in one go, Biden would have hooked you up for a big tax bill. With debt cancellation not threatening a painful tax penalty, the president could move forward knowing that borrowers will not be burdened with heavy taxes.
4. The president has already forgiven some student debt
In March, the Biden administration canceled about $2.3 billion in student loans in the span of about 10 days: $1 billion held by borrowers who said they had been ripped off by their schools, and another $1.3 billion owed by Americans described as completely and permanently disabled.
Last week, another $500 million was wiped out for former students who had been defrauded by ITT Technical Institute, a chain of for-profit schools that went bankrupt in 2016.
In all, the moves have affected more than 318,000 borrowers — a small fraction of the roughly 43 million people who owe about $1.7 trillion in federal student loans.
Obviously, canceling a debt of up to $50,000 per person would be a huge step, costing the government about $1 trillion, according to multiple sources.
While you wait for an answer
If your student loan balance is ruining your finances, try some steps to reduce your spending while Congress, the president, and members of his administration settle the issue of forgiveness.
Explore first refinancing your student loans. Student loan refinancing interest rates have hit record lows, so replacing your federal student debt with a new and cheaper loan from a private lender can help lower your payments. Federal student loan forgiveness would not apply to private loan balances.
Look for savings elsewhere in your budget. Are you paying too much for your car insurance? With many people working from home and driving less, some auto insurers have cut prices. If yours doesn’t deliver a deal, it’s time to shop for new coverage that might save you hundreds of dollars a year.
Other small measures can lead to big savings. To save when you shop online, download a free browser add-on that automatically searches for better prices or coupons. And a popular app helps you earn returns in the stock market merely by investing in “change”.
Taking charge of your finances where you can is almost always a safer bet than waiting for Washington to get its act together.